US aerospace giant Boeing and Brazilian aerospace major Embraer jointly announced on Thursday that they had signed a non-binding memorandum of understanding to create a commercial aviation joint venture (JV). Boeing will hold 80% of the JV and Embraer the remaining 20%.
The deal has still to be approved by shareholders, regulators, and the Brazilian government. All being well, the deal is expected to be closed by the end of next year, some 12 to 18 months after the implementation of the definitive agreements.
The proposed JV would incorporate Embraer’s commercial aircraft and services business. This would be strategically aligned with Boeing’s commercial development, manufacturing, marketing and lifecycle services operations.
One hundred percent of Embraer’s commercial operations has been valued, in the deal, at $4.75-billion. This means that Boeing’s 80% share in the JV will be valued at $3.8-billion.
“The agreement with Boeing will create the most important strategic partnership in the aerospace industry, strengthening both companies’ leadership in the global market,” affirmed Embraer president and CEO Paulo Cesar de Souza. “The business combination with Boeing is expected to create a virtuous cycle for the Brazilian aerospace industry, increasing its sales potential, production, creating jobs and income, investments and exports, and in doing so, adding more value to customers, shareholders and employees.”
“By forging this strategic partnership, we will be ideally positioned to generate significant value for both companies’ customers, employees and shareholders – and for Brazil and the United States,” assured Boeing chairman, president and CEO Dennis Muilenburg. “This important partnership clearly aligns with Boeing’s long-term strategy of investing in organic growth and returning value to shareholders, complemented by strategic arrangements that enhance and accelerate our growth plans.”
The JV will be one of Boeing’s Centres of Excellence for commercial aircraft “end-to-end” design, production and support. It will be completely integrated into Boeing’s wider manufacturing and supply chain. Although the US group will have management and operational control of the JV, its management, including its president and CEO, will be based in Brazil.
As a result of the agreement, Boeing and the JV will be able to offer customers a full, very complementary, range of commercial airlines ranging in capacity from 70 seats to more than 450 seats, plus freighters. The operational and financial aspects of the deal will be finalised in the coming months.
Embraer and Boeing are also planning to create a separate JV for defence products and services, especially Embraer’s new generation KC-390 multi-mission (including air lift) aircraft. This will be aimed at promoting these products and developing new applications and markets for them.
This announcement, coincidently, came only a few days after Boeing arch-rival Airbus announced that its JV with Embraer arch-rival Bombardier (regarding the latter’s new generation C Series jet airliners) had come into effect.